USGIF GotGeoint BlogUSGIF promotes geospatial intelligence tradecraft and a stronger community of interest between government, industry, academia, professional organizations and individuals focused on the development and application of geospatial intelligence to address national security objectives.

October 13, 2016

As the electric power industry generates increasing amounts of renewable energy from intermittent sources such as wind and solar PV, the ability to nowcast radiance and wind velocity with km resolution up to 25 minutes in advance has become essential to balancing electricity demand and supply. This is the newest area where geospatial technology (wind at different altitudes, radiance, and temperature mapping) November 4 of this year NOAA and NASA will launch the GOES-R geostationary weather satellite which will provide support for nowcasting across the continental U.S..

GOES-R's Advanced Baseline Imager (ABI) will collect three times more data and provide four times better resolution and more than five times faster coverage than current GOES. The GOES-R series satellites will also carry the first lightning mapper flown from geostationary orbit. The Geostationary Lightning Mapper, or GLM, will map total lightning (in-cloud and cloud-to-ground) continuously over the Americas and adjacent ocean regions. GOES-R will provide coverage over a 1000x1000km box with a temporal resolution of 30 seconds, and spatial resolution of 0.5 to 2 km. It will completely scan the continental U.S. every 5 minutes, providing coverage of the 5000km (E/W) and 3000km (N/S) rectangle over the United States.

GEOS-R enables “nowcasting” of severe storms across the continental United States. GOES-R will fly the first operational lightning mapper flown in geostationary orbit. It will cover land and oceans. Total lightning (in-cloud, cloud-to-cloud, and cloud-to-ground) information from GOES-R will increase lead time for severe storm warnings because it will make it possible to observe areas of severe weather every 30-60 seconds. This will enable more reliable warnings and evacuations.

October 12, 2016

There is little doubt that "transactive energy" is in the future of electric power in North America, which already has continental grids, and in the EU with the development of the EU's supergrid. The world is rapidly developing the technology that allows energy flows to be determined by market forces (transactive energy). By analogy with Uber and Airbnb, Gartner has predicted that by 2020, the largest energy company in the world (by market cap) will not own any network (grid) or generation assets. It will manage information about energy sources and consumers. Another option is a decentralized,distributed transaction system that allows generators such as you and I as well as traditional large scale utility generators to sell energy to you and me and other users, but without a centralized transaction manager.

Blockchain is a decentralized, distributed database for managing transactions. Blockchains provide a global infrastructure untethered from the stability or permission of governments and institutions. It is the technology underlying Bitcoin. The generalized version is often referred to as blockcoin 2.0. Blockchain supports smart contracts. Nasdaq and other financial institutions including banks have been experimenting with and developing applications based on blockchain technology. Nasdaq has opened its blockchain services framework to more than 100 of its market operator clients around the world. The blockchain services are part of what Nasdaq calls its "Core Services" component which serves as a hub for its financial applications. Late last year an issuer was able to use Nasdaq Linq blockchain technology to successfully complete and record a private securities transaction - the first of its kind using blockchain technology. Chain.com, a Nasdaq Linq client and blockchain developer, documented its issuance of shares to a private investor using Nasdaq's blockchain-enabled technology.

Earlier this year Nasdaq demonstrated a blockchain service that lets solar power generators sell energy certificates (Nasdaq Explores How Blockchain Could Fuel Solar Energy Market). The project is part of a collaborative effort between Nasdaq and design firm IDEO's CoLab to facilitate partnerships that take a design-based approach to creating human-usable technology. Internet connected solar panels have been developed with technology provided by Filament, a Nevada-based blockchain startup. Its technology allows traditional electronic devices to be connected online. The solar panel is actually hard-wired into the IoT device through a converter which enables Nasdaq to measure the wattage the panels are generating into the grid. Using the API of Nasdaq's blockchain-based private markets platform, anonymous certificates are created which can be sold to anyone who wishes to subsidize solar energy. The cryptographically verified certificate, representing solar power generated in the western US, appeared live on the screen in New York City.

Nasdaq is not the only organization exploring blockchain for energy transactions. Brooklyn-based startup LO3 has partnered with Consensus Systems on TransActive Grid which is combination of ​software ​and hardware ​that enables members to buy and sell energy from each other securely and automatically, using smart contracts and the blockchain.

In Vienna, Grid Singularity is using blockchain to support energy-related transactions. "Damit haben wir (fast) alles beisammen, was in der neuen Energiewelt relevant ist oder kurzfristig wird: dezentrale Energieversorgung, Digitalisierung, disruptive Geschäftsmodelle, Smart Contracts, Blockchain, Kryptowährung. Als Wegweiser in die neue Energiewelt, haben wir am 23. Mai 2016 den 1. Blockchain-Tag in Deutschland veranstaltet." (We've just about got everything we need for the new energy world, decentralized energy distribution, digitization, disruptive business model, smart contracts, blockchain, and cryptographic security. As a signpost to the new energy world, we have instituted May 23, 2016 as the first Blockchain Day in Germany.)

Australian startup Sun Exchange has developed a platform that lets investors back small-scale solar projects and receive monthly dividends.

MIT start-up SolarCoin (SolarChange in the US and EU) pays people with an alternative digital currency for generating solar energy. SolarCoin is based on Bitcoin technology. The original concept for SolarCoin required a central bank. Blockchain is decentralized making the central bank unnecessary. People earn coins as a reward for generating solar energy. People with solar panels on their house receive solar renewable energy certificates from their energy company in return for feeding a megawatt-hour of electricity back into the grid. These certificates are already traded for cash, but if you present them to SolarCoin you will get a coin. SolarCoins are now given in 23 countries. The SolarCoin market cap is currently estimated to be about $2 million.

May 30, 2016

MGM Resorts is planning to leave the NV Energy grid in October even if it has to pay $86.9 million in exit fees to do so. Wynn is also planning to leave the NV Energy Grid late this year, but is challenging the legality of the calculation of exit fees. The casinos plans to leave NV Energy under a law passed in 2001 law that allows corporate customers to leave the power grid. MGM's plan to exit still requires Public Utility Commission (PUC) approval. Another casino Las Vegas Sands Corp has dropped plans to leave the grid, presumably deterred by the large exit fee.

Reportedly a number of states in the U.S. have legislation allowing large corporate customers to leave the grid. In about 18 of these like Texas and Georgia there are no exit fees. In others such as Nevada there are exit fees though the legality of large exit fees is being challenged.

NV Energy has a green tariff program, called Green Energy Choice in northern Nevada, that offers customers the choice of using 100 percent or 50 percent renewable energy but they have to pay an additional amount on their monthly bill for using renewables. But MGM Resorts has signed 20 year power purchase agreements (PPAs) with independent power suppliers who can supply renewable power much cheaper than NV Energy can. So much cheaper that MGM is willing to pay over $80 million to leave the grid.

May 24, 2016

Gartner has predicted that by 2020 the largest electric power company will be an Uber-like behemoth that will not own assets but will simply manage energy suppliers and energy consumers in an open market. This business model requires transactive energy, where energy flows are determined by market forces.

The New York Public Service Commission (NYPSC) has taken a major step toward a future of transactive energy. New York's "Reforming the Energy Vision" (REV) is moving the New York state electric utility industry toward a radical redefinition of utilities as we have known them over the past hundred years since Tesla and Edison created the electric power industry. In the future in New York State the utility industry will be comprised of distributed system platform (DSP) providers, basically providing the grid but not directly selling energy, and a competitive energy market with consumers and many energy providers including bulk power generators and distributed energy generators including you and me with rooftop solar panels. This model has similarities with the UK model which is disrupting the traditional energy market in the UK.. The development of the REV model is being closely watched by many utilities who see the writing on the wall and hear the death knell of the utility business model we have known for the past 100 years.

In 2014, Governor Cuomo announced REV with the intention to develop an integrated energy network able to combine a central grid and distributed power generation.

May 19, 2016 the New York State Public Service Commission (NYPSC) adopted Order Adopting a Ratemaking and Utility Revenue Model Policy Framework (Download New York REV Ratemaking May 2016 NYPUC {D6EC8F0B-6141-4A82-A857-B79CF0A71BF0}), an order that outlines ratesetting for a multi-year regulatory-driven process to reform the electric power utility business model in New York State. The NYPSC has made it clear that this process has to occur much more rapidly than regulators and utilities are accustomed to. The order states that the historic pace of regulatory change is inadequate, because recent developments in this and other industries demonstrate that slow and deliberate progress is not always an option and may no longer be acceptable. The NYPSC intends to establish a regulatory environment that encourages faster adoption of business model change that it sees as necessary.

For the electric utility industry which is facing large infrastructure needs, decreasing system efficiency, environmental demands, weather and customer driven resilience requirements, customers who want more choice, and technology that is decentralizing the grid, the current utility and regulatory model could lead to grid defection, stranded investments and increasing financial challenges. The NYPSC has recognized that the structure of competitive markets outside of the utility industry has changed dramatically and the utility sector, which has been insulated from the opportunities and the competitive pressures of the modern information economy, is now going to have to change rapidly. Technology in a competitive market reduces excess inventory, increases asset utilization, and makes possible innovative marketing strategies. As a result, the traditional utility’s role has evolved to a platform service that enables transactive energy in the form of a multi-sided market in which buyers and sellers interact.

The reformed electric system will be driven by consumers and non-utility providers, and it will be enabled by utilities acting as Distributed System Platform (DSP) providers. Utilities are responsible for reliability, and the functions needed to enable distributed markets are integrally bound to the functions needed to ensure reliability.

It is our conclusion that requiring the utilities to serve as DSPs under our regulatory authority and supervision is in the best interests of New York consumers.

By expanding the role of the utilities to include DSP functions, utilities will have the regulatory obligation, operational capability, and economic incentive to optimize the use of DER (distributed energy generation).

As the platform provider, utilities will not participate as owners of DER where a market participant can and will provide these services. Thus, with the few exceptions discussed, DER will remain a non-utility service provided by the competitive market.

In order for distributed generation to compete on an equal footing, interconnection with the grid must be enabled through technical rules and processes that are not only safe but also efficient and expeditious.

Each utility will serve as the platform for interface among its customers, aggregators, and the distribution system. Utilities will respond to new trends by adding value, thereby retaining customer base and the ability to raise capital on reasonable terms. Simultaneously the utility will serve as a seamless interface between aggregated customers and the NYISO (The New York Independent System Operator (NYISO) operates competitive wholesale electric power markets).

Reforming ratemaking

The NYPSC cites three principles of the Framework Order as particularly relevant to the reform of ratemaking.

The unidirectional grid must evolve into a diversified distributed model engaging customers and third parties.

Ensuring universal, reliable, resilient, and secure delivery service at just and reasonable prices remains a function of regulated utilities.

The overall efficiency of the system and consumer value and choice must be improved by achieving a more productive mix of utility and third-party investment.

The NYPSC states that utilities will remain regulated, but will have new ways of generating revenue and creating investor value:

The new ways of generating revenue are intended to create a regulatory environment where utilities can create shareholder value, comparable to or superior to conventional investments, by integrating third-party solutions and capital that improve the efficiency, resiliency and flexibility of the physical networks, reduce consumer total costs and achieve the State’s policy objectives.

Specifics

The specific measures that the NYPSC intends to mandate for the utility sector in New York State includes

Platform service revenues - new forms of utility revenues associated with the operation and facilitation of distribution-level markets.

Earning Adjustment Mechanisms- there are temporary, short-term measures that are intended to bridge the transition form the current business model to the new model.

System efficiency: Each utility will propose a peak reduction target and a load factor improvement target.

Energy efficiency: The Clean Energy Advisory Council will develop targets for energy efficiency.

Customer engagement: Utilities will be able to propose positive opportunities based on customer uptake in innovative engagement programs.

Interconnection: A positive earning opportunity will be developed based on satisfaction surveys of DER providers regarding utilities’ progress in timely and cost-effective interconnection approvals.

Affordability: To assist low-income conumers, affordability metrics will be established as scorecards, and financial incentives will be established in rate cases as appropriate.

Greenhouse Gas reductions: The NYPSC is considering a Clean Energy Standard to achieve the State’s target of 50% renewable generation by 2030.

Data access. The conditions under which utilities may charge for individual customer usage data are established. Standard reporting of aggregate customer data is provided for. Certain basic levels of information will be free of charge, while utilities may charge a fee for provision of more refined data or analysis.

Active consumers — customers who use DER with the purpose of reducing their bills

Prosumers — those customers who install solar PV generation or other technologies that allow them to sell energy to the grid

It was also recommended that a method be developed for valuing the contributions of distributed energy generation (DER). This is intended to be used in valuing DER such as solar PV. It would be used to reform net energy metering (NEM). Net metering allows solar users to receive credit for excess power back to the grid at retail rates. In the immediate future it is recommended that the current NEM policy should be continued for small rooftop installations. (A partnership of solar providers and utilities has just filed a proposal for maintaining NEM with the NYPSC)

May 21, 2016

The Public Utilities Commission of Nevada (PUCN) has announced new net metering rules and rates for residential customers. The order implements a structured transition to cost based rates for net metering customers over twelve years.

Customers will be required to pay a fixed basic service charge plus a charge per kWh of power they consume. If they generate power with rooftop solar PV panels, NV Energy will provide a credit per kWh that the customer delivers.

The rates that the PUCN sets for services provided by NV Energy, as well as the value of the credit for excess energy delivered by net metering customers, will be reset by the PUCN periodically. The forecast for these rates in Southern Nevada are listed below.

The above scenario projects that the average monthly bill (for customers without rooftop PV) would rise from $118/month in 2015 to $134/month in 2028, which is about 1% per year, likely less than inflation, so that represents a small decrease in the monthly bill.

If the customer generated, say, half of his/her own power with solar PV, the bill would increase from $26.63/month in 2016 to $73.71/month in 2028, which is an increase of nearly 10% per year for the same amount of grid delivered power. Of course if the customer took advantage of time-of-use pricing and other programs, this would be different, but the most important factor is the difference between what the customer pays for power and what NV Energy pays for customer generated power.

For comparison, Sacramento Municipal Utilities District (SMUD) currently charges $18/month as a flat infrastructure fee, but has calculated it needs to increase that to $28/month to cover the cost of maintaining the grid. SMUD either pays for net-surplus electricity generated by the customer at SMUD's average cost of generation, which may be below the retail rate, or alternatively SMUD will provide credits at the retail rate.

May 16, 2016

The U.K. electricity industry has been through privatization and changing regulation. From privatization to consolidation to expansion the market has seen cyclical consolidation and expansion. The structure of the industry that has evolved has become a model for many others including North American regulators and utilities.

There are many companies in the electricity generation sector, from large multinationals to small, family-owned businesses running a single site. Transmission in the U.K. is operated by three regulated monopolies. Fourteen distribution companies are responsible for the distribution infrastructure. There are 39 energy suppliers who compete with each other to supply energy to customers. Full competition was introduced into Britain’s retail energy markets for large customers in 1990, in 1994 for medium sized entities and in 1998 for domestic customers.

At the Future of Canada's Utilities Summit in Toronto, Lawrence Slade, CEO of Energy UK, gave a fascinating overview of the evolution of the U.K. energy retail market from a market that was perceived as broken, noncompetitive and inefficient, to its present disruptive (to incumbents) state with new entrants into the market almost every week.

Energy UK is the trade association for the UK energy industry representing over 80 suppliers and generators of electricity and gas for domestic and business consumers.

The energy regulator in the U.K. is Ofgem. In 2002 Ofgem abolished price caps across the market based on the concept that "competition could deliver more benefits for customers than regulation." But there was a widespread perception that the market was not competitive. In 2008 Ofgem announces a probe into energy supply markets. In 2014 Ofgem referred the energy market to the Competition and Markets Authority.

However, in the last few years, the number of customers switching their energy supplier has increased dramatically. The number of new energy suppliers has gone up dramatically and the public has shown with its feet that it prefers the new entrants to the incumbents. More than a million customers are leaving the incumbents for the new entrants every year. The market share the new entrants has achieved is remarkable, 15% in a couple of years and it continues to rise.

There are price comparison web sites. Collective switching where customers join together to get a better price from a supplier is commonplace. This together with government ads has achieved a record level of customers switching, 4 million in 2015 and over 1.1 million in the first quarter of 2016.

The biggest hurdle that had to be overcome and continues to be a challenge is engaging with customers. When the market was first opened up, many customers didn't understand how the market functions. Many assumed that all energy companies are the same and it wouldn't be worth switching. The reality is that customers can save hundreds of pounds a year by switching. An Ofgem survey in 2014 found that the amount of money that the average customer would have to save to encourage them to switch was £94. It turns out this is just about the amount that customers save per annum by switching.

But it is not just about price. The new entrants have done a better job of engaging with the customer, by providing green energy, better customer service, a free heater or broadband and energy packages. The incumbents have realized that they are rapidly losing a major part of their customer base and are starting to fight back.

The future

In the future it is expected that customers will be able to switch in 24 hours rather than the current two weeks. There will be additional trials to try to engage with late adopters, the customers who still have not seen the value of switching in a competitive market. The rollout of smart meters will make it easier for innovators to use customer power usage patterns to demonstrate the advantage of smart devices, batteries and load shifting. It is expected that energy suppliers will get more involved in managing devices on the other side of the meter.

There is the threat of intermediaries coming between the customer and the energy supplier leading to disconnect of the relationship between a supplier and their customers. The continued drop in cost and efficiency improvements from solar PV and batteries may lead to customers going off the grid. This creates a regulatory headache of how to recover costs for stranded network assets that may only carry a small proportion of their design capacity. On the plus side electric vehicles and the possible decarbonization of heat could potentially reverse the demand decline.

May 09, 2016

Don't underestimate how easily a regulated industry can be disrupted by a little technology and a better price. Referencing Uber and the regulated taxi industry, that was one of the key messages that Peter Fraser, Vice President, Industry Operations and Performance, Ontario Energy Board (OEB), left his audience with at the Future of Canada's Utilities Summit in Toronto. Those are strong words from a senior executive at the organization responsible for regulating the electric power and natural gas industries in Ontario, a province with ten million people and the largest economy in Canada.

He went on to say that the electricity sector in Ontario is undergoing a profound change, an even bigger change than the introduction of the wholesale electricity market in the 1990s. He mentioned low carbon economy, new technologies to generate, transmit and distribute electricity, and the changing needs of their customers as the major drivers of this change that will reshape utilities. He said that regulators such as the OEB need to adapt regulation to this new world, including the way electricity is priced. Electricity needs to be priced in a way that increases system efficiency, gives customers the control they want including greener energy, and encourages innovation in an industry that has traditionally been focused on keeping the lights on with 100 year old technology.

New technology that is driving change includes solar PV, smart meters and other smart devices, and electric power storage. But the “secret sauce” behind all of this is the penetration of modern communications technologies such as wireless and packet switched networks into the electric power grid. Together these technologies are enabling microgrids, which Peter sees as an important part of the future for utilities.

Consumers, whose relationship with their power utility in the past has been a monthly bill, now expect a much more complex relationship with their utility. They expect to sell power to the utility, want to install their own power technology, want less fossil fuel generated power and will most likely use less power from the utility. Distributed renewable generation and a non-traditional demand curve are directly impacting utility revenue and forcing a change in the utility business model. Nearly every speaker at the event referred to the "duck curve" (graphic from CAISO) which shows demand dropping during the day as a result of customers generating their own power during the day, but which represents falling revenues for utilities who continue the traditional utility business model of selling electricity.

To begin to address the changing landscape of power generation and demand, the OEB has several initiatives underway. A OEB report released last November concluded that the Regulated Price Plan (RPP) in Ontario had been moderately effective in shifting residential load, but ineffective in shifting small business load. In response to the report the OEB is laying out a five-point plan to be implemented over the course of the next 3 to 5 years. The OEB intends to redesign the RPP roadmap to respond to policy objectives, improve system efficiency, and give consumers greater control. The five components of the new RPP roadmap are focussed on renewing the RPP objectives, empowering consumers by enhancing energy literacy and non-price tools, implementing price pilots, engaging with small business consumers, and working with government to reduce barriers.

The OEB will roll-out new price plans beginning in 12 months. The new RPP will reflect that distribution systems will have to change to accommodate more power coming from customers, that the demand for power demand for power is falling, but that the costs of utilities in maintaining the grid need to be covered.

What this will be mean for residential customers in Ontario is a fixed monthly charge for distribution services. This is similar to what other utilities such as Sacramento Municipal Utilities District (SMUD) are doing. For commercial and industrial customers the price of electric power will be determined by peak consumption, but price signals will allow customers to choose to shift their load to off-peak times. This potentially will be a win-win situation where customers reduce their electric bill and the utility benefits from a reduced peak load. The new price plan will also aim to encourage innovation. One of the areas where the OEB sees innovation occurring is behind the meter, where microgrids are expected to proliferate in the future.

As I have blogged about before, in the new world of electric power sometimes referred to as Grid 3.0, location will play a strategic role, as an essential component of "nowcasting" generation from intermittent sources such as solar and wind as well as increasingly granular demand estimation. It also provides the foundation for integrating data from smart devices, operational systems, and external data sources for real-time situational assessment.

In Ontario nearly all electricity customers have smart meters. Ontario is unique in North America in that all of the usage data from smart meters for the entire province, about 4.9 million residential and small business consumers, are stored in a central repository called the Smart Meter Entity (SME). To date little has been done to take advantage of this valuable repository of electricity usage data. The current database lacks some important information that would help make this data more useful. For example, currently it can't distinguish between residential and small business customers and it lacks location information. The OEB has asked the SME to collect postal code, type of consumer, and some other useful information. It also is being asked to anonymize that data so that it can be made available to third parties.

Attracting young people especially digital natives to the electric power has been challenging because in the past the power industry was not perceived as an exciting industry to be involved in. That is changing. Not only has new technology, especially digital technology, made electric power one of the most rapidly changing and exciting industries to be in, but it also means that utility employees are becoming agents of change with the potential to deliver social good. Power employees once again will be the good guys, as they were 100 years ago.

It looks like big changes are coming to the Ontario energy retail market, and they may be coming sooner that we expect.

February 11, 2016

Today at DistribuTECH2016, three very distinguished, experienced people in the technology business, Zarko Sumic, Distinguised Analyst at Gartner; Chandu Visweswariah, IBM Fellow; and Sharon Allan, CEO of the Smart Grid Interoperability Panel (SGIP), each presented their perspective on the utility sector of the future. What emerged appeared to be the same remarkable animal but from three different perspectives.

Zarko started by pointing out the extraordinary coincidence that Facebook (market cap $230b), Uber (est value $50 B), and Airbnb (est value $24 B) are the largest (or the second largest in the case of Airbnb) companies in their line of business, but significantly none of them own content, cars or rooms. Zarko and Gartner call this phenomenon the sharing economy. A sharing economy uses IT to distribute, share and reuse excess capacity in goods and services. Information is the fuel and the digital platform is the engine. The sharing economy operates in a market with customers and sellers and the value of the goods and services shared is determined by the network effect (Metcalfe's law) and increases as the square of the number of nodes (customers and sellers).

Zarko sees an analogy with the electric power industry today, as we move toward a world where energy flows are increasingly determined by market forces (referred to as transactive energy). Based on the analogy with Facebook, Uber, and Airbnb Zarko predicts that by 2020, the largest energy company in the world (by market cap) will not own any network (grid) or generation assets. It will manage information about energy sources and consumers. He does not see any technical barriers to this vision. The only thing standing in the way at the moment is current regulation.

The utility digital distribution platform creates new value by enabling an open energy market which brings together those who have energy with those who want it. It requires a network operator who manages and ensures the reliability of the grid (similar to the role of Network Rail in the UK) and a sharing energy economy platform operator (like Facebook, Uber and Airbnb) who brings together energy providers and buyers including prosumers, and calculates transaction and delivery costs.

Chandu put it this way, "energy is getting digitized". His perspective is that renewable energy, whether wind or solar, introduces a major element of variability into power networks which is seven times greater than in our current networks where most of the variability is due to demand. Weather is the source of most of the variability. Predicting when the wind will blow and with what force and cloud cover are critical for managing future power networks in addition to predicting and managing demand with techniques such as demand response. IBM has two major projects based on predicting these external factors, Deep Thunder for weather prediction and Opus for a power project whose first implementation is in Vermont. In Chandu's view time of use pricing, demand response, and other programs are practical examples of capabilities that utilities have already implemented and that are required to support transactive energy that underpins all three's vision. Transactive energy means fundamentally that market forces control the flow of energy. It requires price signals from the energy supplier and demand signals from the buyer.

Sharon shares a similar long term vision of the energy sector and also sees transactive energy as the future toward which the sector is heading. It is the consumer that is driving the industry. As Jon Wellinghof, ex-chairman of FERC put itthis way

"Advances in technology and the desire we are seeing at the consumer level to have control and the ability to know that they can ensure the reliability of their system within their home, business, microgrid or their community. People are going to continue to drive towards having these kinds of technologies available to them. And once that happens through the technologies and the entrepreneurial spirit we are seeing with these companies coming in, I just don't see how we can continue with the same model we have had for the last 100 or 150 years."

She gave a number of examples of how interoperability standards from IEEE, IEC, and SGIP; programs from government agencies such as the Department of Energy, ARPA-E and Pacific NW National Lab (PNNL); and industry organizations such as EPRI are moving toward a common vision of the utility of the future. Sharon put it very strongly in front of a room filled with utility employees and vendors and consultants, "get ready for transactive energy, this is real, this is not hype."

May 26, 2015

At the beginning of May Elon Musk gave a presentation is which he offered his vision of an alternative to fossil fuels as the future of humanity's energy sourcing and delivery. Musk's long term objective is global carbon free energy for power generation and transportation. He announced Tesla Energy and its first products, lithium-based Powerwall consumer (10 kWh) and Powerpack utility-scale (100 kWh) batteries. He also discussed a third product, GigaFactory, which he described as a gigantic machine to manufacture Powerwall and Powerpack batteries.

Elon Musk is an entrepreneur with a vision for humanity. He is the chairman of SolarCity and his vision for practical carbon-free energy helped start the company. SolarCity has already had significant transformative impact on the traditional power utility business model. He is also the founder and CEO of Tesla Motors, a manufacturer of electric vehicles and batteries. (He is also CEO of Space-X, but that's another discussion.) Musk is proposing a fundamental transformation of how the world works, by developing an alternative model for how energy is sourced and delivered. He believes it is possible with solar and batteries to wean the world off fossil fuels and reduce anthropogenic CO2 emissions to near-zero.

The Problem

The world's electric power and transportation is powered by burning fossil fuels. The result is that anthropogenic CO2 emissions have pushed atmospheric CO2 concentrations (first recorded by climate scientist Charles Keeling) to levels not seen even in the paleoclimate record.

The Solution

Musk thinks that collectively we should do something about this, but is has to be practical (and not win the Darwin award). His proposal for a solution has two parts.

1. SolarMusk pointed out that we have this "handy fusion reactor in the sky" in the sun. We don't have to do anything except harvest the energy. Musk calculated the total surface area needed to generate enough power to get the U.S. completely off fossil fuel power generation. Shown as a blue square on Musk's slide it covers less than 1/4 of the Texas panhandle.

2. BatteriesThe obvious problem with solar energy is that the sun does not shine at night and even during the day the the power generated varies. Energy captured from the sun needs to be stored. Battery technology has evolved to the point where the size of the batteries needed to wean the U.S. power generation off fossil fuels is the size of a pixel ("the red pixel") on Musk's slide.

In Musk's view what is needed is a battery that simply works. A battery that doesn't require a lot of space, is reliable, works with existing home electrical networks and solar installations, is safe, can be used for years and is affordable. The Tesla Energy consumer battery, the Powerwall, is wall-mounted and comes in different colours so you don't need a battery room. It stores either 7 kWh (priced at $3000) or 10 kWh ($3500) and can be stacked for up to 90 kWh. To put this in context the average Ontario homeowner uses about 800 kWh a month in energy which translates to an average of 27 kWh a day. The Powerwall comes with a 10 year warranty.

What it gives you is peace of mind. You don't have to worry about being without power after an ice storm. It also gives consumers energy independence. Together with solar panels with these batteries consumers can go completely off the grid. This presents a huge challenge to the traditional electric power utility business model, comparable to the impact of cell phones on traditional land-line telephone companies.

Powerwall is targetted for homes and small commercial sites. You can order the Powerwall right now on the Tesla web site. Musk said that shipping will start in 3 to 4 months. Initially the rampup will be slow because the batteries will be made in Tesla's Freemont, California factory. But next year the rampup will accelerate as Tesla transitions to its Nevada Gigafactory.

Tesla is not the only company producing this type of battery. Aquion Energy and Iron Edison are also also producing consumer-scale power batteries. You can see how Tesla's Powerwall and these other companies' products compare from a financial perspective here.

Powering remote locations

Battery power is even more crucial for people in remote locations where there is no grid (remote parts of India and Africa), electricity is intermittent (many urban areas in India), or extremely expensive (northern Canada). Musk thinks that the Tesla Powerwall can scale globally. What he expects to see is what happened with cell phones and landlines. The cellphone leapfrogged the landline. There wasn't any longer a need to put landlines in remote locations. People on islands or remote locations can install solar panels and Tesla Powerwalls and never have to worry about electicity lines.

Utility-scale battery storage

The Tesla Powerpack (100 kWh), which is designed to scale infinitely, can provides gigawatt power. According to Musk Tesla Energy is already working with a utility on a 250 mWh Powerpack installation.

Emphasizing that the Powerpack is a reality, Musk announced that the entire evening event had been powered by Powerpack batteries that had been charged by the solar panels on the roof of the building where the event was taking place. The entire evening was powered by stored sunlight.

Tesla's competitors in this market include Eos Aurora and Imergy Flow. You can see how Tesla's Powerpack and other companies' products compare financially here.

The big picture: transitioning the world to sustainable energy

Musk calculated that 900 million Powerpacks would be required to transition the world to renewable electric power (90,000 GWh). To transition the world to renewable electric power and electric powered transportation would require 2 billion Powerpacks.

Musk made the case that this is something that humanity is capable of by looking at what humanity has already done with transportation. There are about 2 billion cars and trucks on the road. About 100 million cars and trucks are produced every year so that the world's transport fleet gets refreshed every 20 years. Musk's argumemnt is that if we can do it with vehicles, it is within our power to do it with batteries.

This is the reason that Tesla's approach in developing the Gigafactory is to treat it as a product. They are designing a giant machine for making batteries. Musk foresees that there needs to be many gigafactories in the future. He emphasized that this is not something that Tesla is going to do alone. Many other companies need to develop their own gigafactories.

Musk also announced that Tesla's policy of open sourcing patents will continue for gigafactories, Powerwalls, Powerpacks, and other technologies.Musk foresees with this technology a future where the Keeling curve will flatten and where there will be no incremental anthropogenic CO2 increase. The path that he has described based on solar panels and batteries is the only path that he knows can achieve this. In his view it is something that we must do, that we can do, and that we will do. I have to agree with Ed Parsons. This is on the level of Steve Jobs revolutionizing consumer electronics and commercial music delivery, but working on the "slightly bigger challenges" of carbon-free transportation and power generation.

October 30, 2014

The New York Public Utility Commission is moving the New York state utility industry toward a radical refinition of utilities as we have known them over the past hundred years since Tesla and Edison created the electric power industry. In the future in New York state the utility industry may be comprised of distributed system platform (DSP) providers, basically providing the grid but not directly selling energy, and and energy market with many energy providers including bulk power generators and many distributed energy generators, you and me with rooftop solar panels.

Currently the grid is comprised of large, central power plants interconnected via transmission lines and distribution networks that feed power to customers. But this is beginning to change with the rise of distributed energy resources (DER) such as small natural gas-fueled generators, combined heat and power plants, electricity storage, and especially solar photovoltaics (PV) on rooftops and in larger arrays connected to the distribution system. DER already has had a significant impact on the operation of the electric power grid and its role will undoubtedly become even more important in the future.

Solar power is growing rapidly. 4.2 GW of solar power was added in 2013 in the U.S. It is not unreasonable to expect reaching 20GW of solar and a million installations in the near future. This proliferation of solar is driven primarily by customers wanting choice and by solar PV becoming very economical. For the first time in 100 years companies like SolarCity are providing consumers with a competitive alternative to the local power company. This is disruptive for the traditional utility business model. Many utilities are aleady trying to adapt to this new world, for example by utility-provided solar power at Wright-Hennepin Cooperative Electric Assn.

In the traditional utility model, if you compare variable and fixed costs with fixed and variable revenue, there is a mismatch. This translates into a revenue shortfall or unrecovered cost when you compare a non-solar customer's with a solar customer's annual bill. The problem is not technology, it is the current utility business model and in the utility industry in the U.S. there is an increasing recognition that it has to change.

In Maryland earlier this year in response to a recommendation from the Governor’s Task Force on Grid Resiliency to “scope out a Utility 2.0 pilot proposal", the Energy Future Coalition (EFC) prepared recommendations for a smart grid pilot project that would address key business objectives including a regulatory framework for the smart grid and a new utility business model that would keep utilities financially viable even as they delivered less electric power. EFC's key recommendation is a new utility business model that would decouple utility revenue from selling electric power.

Reforming the Energy Vision in New York State

New York has gone a step further. A Straw Proposal submitted by New York Department of Public Services (DPS) staff in its capacity as adviser to the Public Service Commission (PSC) proposes increasing the use and coordination of distributed energy resources(DER) via markets operated through a distributed system platform (DSP). Fundamentally this means that DSPs are not in the business of directly selling power themselves (unlike today's utilities), but create and maintain the market and infrastructure for the sale and distribution of electricity produced by the wholesale market (bulk generation) and thousands of DER generators. In the Straw Proposal DER is used to describe a wide variety of distributed energy resources, including end-use energy efficiency, demand response, distributed storage, and distributed generation.

Earlier this year New York’s Governor Andrew Cuomo asked the New York Public Service Commission to fundamentally shift utility regulation to meet the needs of a more distributed, consumer-focused energy system. In April 2014, the Commission issued an Order Instituting Proceeding for Reforming the Energy Vision (REV) which proposed a platform to transform New York’s electric industry, for both regulated and non-regulated entities, with the objective of creating market-based products and services that would drive an increasingly efficient, clean, reliable, and customer-oriented industry. Regulatory reform would enable coordination of a wide range of distributed energy resources to manage load, optimize system operations, and enable clean distributed power generation. New and existing markets and tariffs would be developed to empower customers to optimize their energy usage and reduce electric bills, while stimulating innovation and new products.

The Straw Proposal supports the central vision of REV, that increasing distributed energy resources(DER) via markets operated through a distributed system platform (DSP) is achievable and offers substantial customer benefits. The proposal found there is large potential for the integration of Distributed Energy Resources (DERs) into the New York electricity market, via a Distributed System Platform (DSP) framework. The integration of DER offers customers the opportunity to manage their usage and reduce their bills while at the same time creating important system and societal benefits such as increased system efficiency and reduction of carbon emissions. (The DPS Staff was assisted in preparing this proposal by Rocky Mountain Institute, the Regulatory Assistance Project, and the New York State Energy Research and Development Authority. )

Distributed System Platform

The foundation for Utility 2.0 in New York is the distributed system platform. The definition of DSP used by the DPS staff is an "intelligent network platform that will provide safe, reliable and efficient electric services by integrating diverse resources to meet customers’ and society’s evolving needs. The DSP fosters broad market activity that monetizes system and social values, by enabling active customer and third party engagement that is aligned with the wholesale market and bulk power system."

The DSP will enable participation by DER service providers in a transparent, open market. It will also create an open platform for new energy products and service delivery by third parties and energy suppliers to consumers.

The DSP will need to integrate new market operation functions with both utilities’ existing grid operations and advanced “smart grid” capabilities. The distributed grid will facilitate deployment of DERs, two-way power flows, advanced communications, distribution system monitoring and management systems, and automated balancing of energy sources and loads. This is intended to lower peak demand on the bulk power system, increase reliability and manage investment needs of the distribution system.

The DSP will the require modernization of power distribution systems. In the future distribution systems will need to operate under conditions very different from those of today. Modernization of distribution systems must meet and balance important policy objectives such as system reliability and resiliency, customer empowerment, consumer protection, system efficiencies, cost-effectiveness, competitive markets, energy efficiency, power quality, fuel diversity, and responsible environmental stewardship.

Implementing the DSP

Currently, power distribution utilities deliver electricity services directly to end-use residential, commercial and industrial customers. The New York Independent System Operator (NYISO) operates the transmission network and manages wholesale electricity markets. Distribution utilities construct, maintain and operate distribution system infrastructure and assets. A growing number of customers are engaged in distributed generation, for example, rooftop solar. There are demand response and energy efficiency programs sometimes run by the utilities themselves, sometime by other agencies.

The Straw Proposal recommends that New York's existing distribution utilities, such as Consolidated Edison, National Grid, and New York State Electric and Gas, serve as the DSPs. This would entail New York's utilities focusing on energy distribution (the grid), market-creation and other electric services but getting out of the business of direct energy sales.

Under the REV vision, the DSPs will responsible for creating a retail energy market which includes both the wholesale energy market and the growing DER markets - you and me with our rooftop panels.

Utility grid operations divisions will continue to be responsible for distribution system planning across the electric network, including the distribution network and connections to the bulk power system.

The NYISO will continue planning for bulk system upgrades, bulk generation forecasts, and other service needs.

Customers will become participants in the management and optimization of the electric system through wide-scale adoption of DER products. For larger customers this could involve actively managing energy usage and generation. For smaller customers automatic technologies and controls could optimize their usage patterns. DER service providers could become aggregators between customers and the DSP.

The Public Services Commission's role will be to maintain a critical oversight of the market. This will include guidance and processes for market rule making, approving investment plans and rate designs by regulated utilities, and reviewing the activities of ESCOs (energy suppliers), third-party service providers, and utilities for compliance with market rules.

Information exchange

One of the important features of the Straw Man proposal is an information exchange. Since customer electric power usage data can reveal opportunities for DER investment and development of innovative products and services such as consumer apps, the Straw Man proposes a bi-directional electricity data information exchange involving customer usage data from smart meters and data from energy generating installations on both sides of the meter. The data exchange is intended to help with monitoring the distribution system, identifying opportunities for DER products and services tied directly to customer data, and to support the development of innovative DER products and services. Customers would have the option to opt out of the data exchange program.

Privacy

Customers would also be able to access to their own energy usage data in a standard format. In addition, customers would be able to authorize that their energy usage data be provided to third-parties such as DER providers, to enable providers to develop and offer products and services that are tailored to the customer’s specific energy patterns and needs. New tools, often apps running on hand-held devices, are being developed to help energy consumers understand the alternatives in purchasing electricity from a third party provider, installing solar PV on their roof, and other energy-related services.